Swedish Pension Bans Israeli Defense Firm on Ethical Grounds

(March 31, 2010) – Four of Sweden’s AP funds in the pay-as-you-go pension scheme have severed ties with an Israeli defense company on ethical grounds.

Following the lead of Norway’s state oil fund, Foersta AP-Fonden, the biggest pension fund in Sweden, said it has shunned Israeli arms maker Elbit from its portfolio because it had built and was operating a surveillance system for a controversial barrier between Israel and the West Bank.

The decision to ban the firm from AP portfolios follows a recommendation by the Ethical Council, which consists of officials from each fund to make sure invested firms behave responsibly and are sticking to international conventions.

“The Ethical Council recommended that Elbit Systems Ltd should be excluded from each portfolio because it deems that the company can be linked to violations of fundamental conventions and norms,” it said in a statement.

While the Israeli government claims the controversial barrier – a network of fences, barbed wire, ditches and concrete slabs — is necessary to guard its citizens from Palestinian attacks and significantly reduces the number of suicide bombings, opponents argue the barrier is an “apartheid wall” and an excuse to control land essential to a future Palestinian state. Critics of the barrier say it isolates Palestinian farmlands, preventing farmers from reaching their orchards, as well as villages and towns. The international community has condemned Israel’s decision to construct the barrier.

The heightened investing standards of Sweden’s AP funds and others around the world show an attraction to socially responsible investment. In September of 2009, the State Pension Fund in Norway, one of the world’s biggest investors, decided to divest from Elbit Systems. Sovereign wealth funds in Saudi Arabia and Kuwait have also become increasingly attracted to investments that benefit future generations.

For example, Abu Dhabi’s Future Energy Company has supported environmental investments through its Masdar Clean Tech Fund, and Norway’s Government Pension Fund has championed its effort to remain a role model for socially responsible investment, blocking 17 tobacco companies from its fund. Additionally, China’s fund has committed to larger clean energy projects.